Shares in Japan and South Korea rebounded after Monday’s losses while Australia’s declined. US equity-index futures edged lower after cash markets were closed Monday for Labor Day. West Texas Intermediate crude oil climbed in early trading and gold extended its gains to a sixth day, its longest winning streak since April 2024.

Treasuries retreated in early trading with yield on the benchmark 10-year rising three basis points to 4.26%. Japan’s 10-year government bond auction Tuesday will be a key test of investor appetite amid growing expectations of rate hikes by the Bank of Japan and mounting political uncertainty.

After a selloff in technology shares in Wall Street Friday, the record-breaking stock rally faces a pivotal test this month, with jobs numbers, inflation data and the Federal Reserve’s rate call all landing within the next three weeks. Tariff tensions and questions over the Fed’s independence are also compounding the risks in September, historically the weakest month of the year for US markets.

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“The bar to derail a Fed rate cut on Sept. 17 appears high,” Deutsche Bank AG economist Peter Sidorov wrote. “But with Fed funds futures now pricing over 140 basis points of easing by the end of 2026, markets are expecting an amount of easing that since the 1980s has only occurred around recessions.”

A gauge tracking emerging-market equities notched its best session in a week amid thin liquidity due to the US holiday, boosted by AI-related stocks in Hong Kong and China.

The MSCI EM Index closed 0.7% higher as Alibaba jumped 19% in Hong Kong — the most in three years — after the Chinese e-commerce giant reported a triple-digit percentage gain in AI-related product revenue as well as a better-than-anticipated 26% jump in sales from the cloud division. The rally marks a break from last week’s broader Asian market decline after a tech selloff hit Wall Street.

Another key factor for the markets is the Cboe Volatility Index sitting at 16.12, not far off its 2025 closing low of 14.22.

“The fact that investors are still betting heavily on new lows in volatility, even with VIX at what appears to be a floor, and with markets up sharply from their April lows to all-time highs, should be viewed with caution,” said Jeff Jacobson, a strategist at 22V Research, in a note Monday.

Traders will also be closely monitoring Indonesian markets after stocks tumbled the most in nearly five months on Monday. Political risks have recently flared, with President Prabowo Subianto canceling a China trip after deadly unrest over living costs and inequality. Stress also was evident in the bond market, with yields on the nation’s 10-year government note rising to the highest in almost three weeks.

Meanwhile, President Donald Trump said India offered to cut its tariff rates following the US imposition last week of 50% levies as punishment for its purchases of Russian oil.

In Europe, bonds weakened broadly, with a week to go before a confidence vote that could topple France’s government. The French-German 10-year spread, a key measure of risk, was little changed at 79 basis points. The gauge closed at 82 on Aug. 27, the highest since January.

Longer-maturity bonds may be in for a treacherous September, if history is any guide.

Over the last decade, government bonds globally with maturities of over 10 years posted a median loss of 2% in September, according to data compiled by Bloomberg. That’s the worst monthly performance of the year.

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